Following a budget season marked by spending cuts and tax hikes, Alexandria is poised to enter FY2012 with money in the bank and extra cash rolling into city coffers.

Kicking off the latest budget cycle, the Alexandria City Council directed staff to settle on a budget without raising real estate taxes November 23. Still, officials expect to see a 3.6 percent uptick in general fund revenue this fiscal year from higher real estate assessments, due out in January.

For Councilman Rob Krupicka, an optimistic economic outlook and increasing revenue means an era of local austerity likely is coming to an end. Between FY09 and FY10, the citys general fund dropped by more than $10 million, from $540.4 million to $530 million, before rising to $531.6 million in FY11.

The citys fiscal year begins July 1 and ends June 30.

This time last year, elected officials were struggling with a roughly $43 million deficit, a result of declining revenue and increasing costs, said Bruce Johnson, the citys chief financial officer.

With property values on the rise, theres light at the end of the tunnel, Krupicka said.

I think we can say for the first time in a number of years we can see the opportunity for a little bit of revenue growth and the easing of constraints, Krupicka said. We started cutting about five years ago. Were five years into a period where every year we’ve been cutting back on services.

Whether the council will adopt a potentially controversial commercial add-on tax to fund transportation projects remains to be seen, but starting with a tax neutral budget leaves wiggle room if the economy dips again, Krupicka said.

He pointed to the rising public schools enrollment as a concern for officials as they craft this years budget.

The capital needs hanging out there for the schools are going to dominate a lot of our discussion, he said. This budget resolution does not fill many of the holes created in the last five years, but is meant to start shoring up foundation so we can move forward.

Vice Mayor Kerry Donley believes the share Alexandria City Public Schools receives from City Hall should increase with the added revenue to the general fund. If the city sees a 3.6 spike in cash flow, so should ACPS, he said.

Donley came out in favor of maintaining a freeze on creating new municipal positions, unless those proposed employees could be justified by increasing revenue or cutting costs. For the fourth consecutive year, cost of living pay increases will be frozen for city employees, though step pay raises remain available.

The vice mayor also reiterated the need to consider a commercial add-on tax as a way to improve transportation infrastructure within the city. Traffic remains a top concern, he said, highlighting the ongoing BRAC controversy as a prime example of the infrastructure problems facing city leaders.

We face a lot of congestion, not just people traveling through here each day, but also our own citizens, Donley said. We need to improve mobility and pedestrian safety and we also need to do so in the high priority areas.

Councilman Frank Fannon called on city employees to increase efficiency. With 2,400 municipal workers, theres got to be some good ideas out there, he said.

Councilwoman Alicia Hughes alone struggled to reconcile the commitment to keep taxes where they are while accepting a 3.6 percent growth in revenue from healthier real estate values. Increased home value means higher taxes, she said.

But Mayor Bill Euille predicted the final outcome would meet with voter approval.

Even in the good day when we weren’t raising taxes and had a slush of monies to play with we had a lot of difficulties … it was never enough, he said. Now we’ve had to deal with short budgets and shortfalls. It’s not an easy task, but it’s one we’re responsible for as leaders of the city and we’ll do the right thing and at the end of the budget process everyone will be pleased with our work.